Trade Policies, Regional Integration, Poverty and Income Distribution in Senegal

Since January 2002, within the framework of the sub-regional economic integration process of the West African Economic and Monetary Union (WAEMU), Senegal has adopted a Common External Tariff (CET) and harmonization of the tax system. These measures have considerably reduced the protection of its economy (50% reduction in customs duties) and consolidated its domestic tax system. This paper assesses, using a computable general equilibrium model, the impact on the well-being of both rural and urban households of trade liberalization scenarios in Senegal.Results show that Government has given more priority to fiscal consolidation than to the potential negative effects of a higher VAT on income distribution and the well-being of households. This arbitration is in line with the spirit of local stabilization and adjustment policies, which have always been characterized by primacy of fiscal rehabilitation over improvements in the competitiveness of the economy